Warren Buffett Investing: 3 Stocks to Buy in August

Warren Buffett just made another interesting bet, which should inspire investors to scoop up stocks like Toronto-Dominion Bank (TSX:TD)(NYSE:TD) and others.

Ambrose O'Callaghan

Ambrose O'Callaghan graduated with a BA in Political Science from McMaster University. After that, he jumped into the banking world. He worked from the front line to an investment associate role. After that, he found a way to marry his experience and knowledge in the world of banking and finance to his love and passion for writing. Ambrose is a passionate believer in Warren Buffett's value investing model.

Published July 30, 2020 1:15 pm EDT

Earlier this week, I’d explored how investors could look to operate like Warren Buffett in this uncertain market. Today, I want to look at three more stocks that fit within the Buffett investing style. Let’s jump in.

close-up photo of investor Warren Buffett — Image source: The Motley Fool

How to follow up another big Warren Buffett bet

On July 27, Berkshire Hathaway revealed that it had purchased another $400 million worth of Bank of America stock. This adds to its significant holdings in the top U.S. bank. Bank of America is Buffett’s second-largest holding, closely behind the tech giant Apple. The vote of confidence in a top U.S. bank should pique investor interest in late July. To follow up this move by Warren Buffett, Canadian investors may want to snag a top Canadian bank stock.

Toronto-Dominion Bank (TSX: TD)(NYSE: TD) is the second-largest financial institution in Canada. Its shares have dropped 14% in 2020 so far. The stock has been mostly flat over the past three months. TD Bank boasts a massive footprint in the United States. Canada’s southern neighbour is battling high COVID-19 rates, but that does not mean investors should stray away from exposure to U.S. assets.

Like its peers, TD Bank has faced huge challenges due to the COVID-19 pandemic. However, its earnings should pick up as North America reopens. It still possesses an immaculate balance sheet. Shares of TD Bank last had a favourable price-to-earnings (P/E) ratio of 10 and a price-to-book (P/B) value of 1.2. This fits with Warren Buffett’s value investing philosophy. Better yet, TD Bank offers a quarterly dividend of $0.79 per share. This represents a strong 5.2% yield.

Don’t sleep on undervalued stocks

Back in May, I’d discussed why Great Canadian Gaming was a mouth-watering target for investors seeking growth. The hospitality sector has been hit hard by the COVID-19 pandemic. Fortunately, casinos are starting to reopen and revamp their businesses across Canada. Changes will come, but casinos will remain profit machines. Warren Buffett advocates looking for high-quality companies that are undervalued. Great Canadian Gaming fits the bill.

Shares of Great Canadian Gaming last had a P/E ratio of 7.6. This puts the stock in very attractive value territory. I’m still very bullish on this gaming stock going forward.

Warren Buffett: Buy discounted energy stocks

The last big bet by Warren Buffett was a $9.7 billion purchase of Dominion Energy. Enbridge (TSX: ENB)(NYSE: ENB) is an energy stock that I’m still in love with as we look ahead to August. Its shares have dropped 12% in 2020 so far. However, the stock is up 5% month over month.

Enbridge released its second-quarter 2020 results on July 29. The energy infrastructure giant delivered another strong quarter for its shareholders. It reaffirmed its financial guidance range for 2020 of $4.50 to $4.80 Distributable cash flow (DCF) per share. Enbridge maintained its quarterly dividend of $0.81 per share, which represents a tasty 7.4% yield. Moreover, the company has delivered dividend growth for 24 consecutive years.

On the value side, Enbridge last had a P/B value of 1.4. This puts it in solid value territory relative to industry peers.